The High Court has denied a judicial review by the UK Statistics Authority and Chancellor seeking to have the Retail Prices Index (RPI) and Consumer Prices Index (CPI) matched beginning in 2030 based on housing costs.
The trustees of the BT, Ford, and Marks and Spencer pension plans, which together represent roughly 450,000 members and £83bn in assets, filed the judicial review petition opposing the government’s proposals.
The government announced in December of last year that it would reform the RPI in its comprehensive spending review. The High Court then granted permission to proceed with a judicial review in December of last year and began in June this year.
The pension funds are heavily obligated to provide pension payments tied to the RPI and the CPI. They have invested in index-linked government gilts, which are investments meant to match those liabilities. These gilts are all RPI-linked index securities.
The High Court rejected the challenges bought forth by the claimants that the UK Statistics Authority’s RPI was unlawful because it failed to take into account how its decision would affect individuals who held RPI index-linked gilts and bonds and those who were eligible for index-linked pensions.
The claimants argued that UKSA did not take into account how the choice would affect legacy users.
Additionally, it claimed that the Chancellor neglected to engage with ‘legacy users’ about compensation and that UKSA failed to consult the public on the RPI decision while the plan was still in “formative stage.”
The pension funds estimate that the long-term impact of the 1 per cent RPI reduction starting in 2030 will affect future interest payments to gilt holders by between £90bn and £100bn.